Currently, payment transactions between a customer and a merchant with credit and/or debit cards are typically routed, for example, from the merchant's point of sale terminal to the card issuer via a merchant's financial institution processor and a card network. The merchant pays discount fees to the merchant's financial institution processor to cover the cost of processing and interchange fees to the card issuer and the card network for accepting cards. For example, when a customer purchases an item from a merchant using a debit or credit card for payment, the merchant captures and logs the transaction and sends the transaction to a merchant processor or acquirer. The merchant processor routes the transaction to the appropriate card network and charges a fee for transaction processing to the merchant and also passes any interchange fee, based upon a merchant category code and processing code, to the merchant.
Upon receiving the transaction, the card network identifies the card issuer and routes the transaction to the card issuer, receives an acknowledgement of the transaction result from the issuer, and the card network charges a processing/switch fee to the issuer and an interchange fee to the merchant processor or acquirer. The card network passes the transaction result to the merchant processor or acquirer, which in turn passes the transaction result to the merchant. If the transaction result is approved, the purchase is completed, the merchant sends an email or mobile notification of the transaction to the customer, and the merchant's account is logged with the transaction. Finally, the card network settles each day's business with the card issuer and the merchant processor or acquirer, and the merchant processor or acquirer settles with the merchant. The fees which merchants currently pay for the privilege of accepting credit/debit cards are significant, especially for smaller merchants who, for example, may lack leverage to negotiate lower fees.
Currently, the financial services industry is struggling with payment processing issues, such as credit and debit card payment processing issues. Timing and expense are important, for example, to merchants who prefer to receive customer payments as soon as possible. While there are technologies available to expedite the payment, each has its separate cost. Financial institutions would like to be able to offer a reduction in the cost of performing such payment transactions and, at the same time, generate incremental revenue while managing their liquidity position.
The financial services industry is also currently struggling to answer the question of the fastest way to route a payment, for example, to a particular financial institution. A present focus is on using, for example, the automated clearing house (ACH) process. Another present focus is on a high-tech process, sometimes referred to as the automated teller machine (ATM) rail or debit rail using card association networks, such as VISA® and MASTERCARD® processing networks by which payment transactions are executed in what is considered to be real-time.
However, these alternatives can be very expensive. ACH transactions can cost from 2 cents to 4 cents per transaction, and card association network fees, such as those imposed by VISA® or MASTERCARD® processing networks, for example, can be, e.g., $4-$5 for a $300 payment.
Accordingly, there is a current need for a global financial institution with major authorization systems to numerous countries worldwide and an extensive corporate client population to move money in a way that can optimize the transaction with the least associated expense while meeting the customer's needs to have payment transactions executed in real-time or near real-time.